Project Management: The Top 10 Mistakes to Avoid

By Joe Rodarti

How do you define project success? A project completed within cost, time, and quality constraints set forth in the "contract documents" is successful. Deficiencies in any of these areas cause projects to fail.

Beginning in the conceptual phase, most decisions are made "instinctively," leaving risks implicit and managed by judgment informed by the experience of the particular project participant. Leaving risks to be dealt with in this manner often leads to the painful consequences of protracted disputes, delays and unanticipated costs. Following are 10 mistakes that, in our experience, are commonly committed in the development process and result in problems for the development team; ultimately the owners/investors:

1. Lack of pre-project planning

Pre-project planning requires a focused effort. History proves that the lack of systematized pre-project planning is the actual cause of failed projects and an enormous amount of disputes that occur throughout the design development, construction and post-construction phases. Pre-project planning starts with program and scope definition. The process involves: integrating and coordinating all project plans to create a consistent, coherent document; carrying out the project plan by performing the activities included in the project plan and coordinating changes across the entire project. The process then seeks to ensure that the project includes all work required to complete the project successfully. The goal is to plan to achieve a "project baseline" in terms of scope, costs and time. In this manner, changes can be more easily determined and managed and claims can be minimized, if not altogether avoided.

2. Contracting out of habit

Interestingly, most of our new clients have no process for determining what contracting strategy is best suited for the particular project at issue. If there is a process, it's the "one used last time." Suffice it to say that this is not always the best method to use when it comes to developing specific contracts for specific projects.

3. Lack of adequate budget planning

We see too many instances when an unsupported project budget drives contracted costs. The result not surprisingly is costs "overruns." In a market when escalation of costs is as prevalent as weight gain, adequate budget planning has become a science. Reliance on "old" budgets does not work. Even if the chosen general contractor is brought in early on a "pre-construction" basis, most general contractors are not adept to estimate costs when the plans are not sufficiently complete. Beyond hard and soft costs, there is time, requiring a developer to have a time and costs management program.

4. Lack of adequate contingency planning

Contingency planning is too often left to chance. There are a number of methods available for determining the contingency for handling uncertainties. Generally they are traditional, through the use of allowances based on past experience; simulation-methods that use the power of the computer to predict the possible range of outcomes for the project; analytical, through the use of the mathematics of probability to assess and combine the effects of the individual events into an overall measure of risk; and discrete event-through the use of decision trees, influence diagrams and utility theory.

There are tools that can be implemented to address this issue. Borrowing from the design/build community, we have engaged a process that implements so called conceptual estimating, also known as cost modeling or parametric estimating. These methods of estimating allow for a process of establishing a project's cost, often before any graphical representation of the development has been developed.

5. Lack of proper design-related buy-out

Yes, there is a design consultant "buy-out" process. Almost all developers universally rely on proposals issued by all of these consultants. What almost all of these proposals include is an insufficient description of the services included. What almost always happens is claims by these consultants for more money. Developers need to stop relying on these proposals and learn how to buy out all of the services that will be required from the get go. This can be accomplished by preparing your own RFP's that contain all of the essential requirements and some extra ones that make sense to negotiate before the consultants starts on the job and has you over the barrel on any terms and conditions.

6. Lack of adequate contract administration/change management

So you have great contracts. These contracts contain adequate definitions of scope, scheduling requirements, what is and is not included as part of the costs of the work, etc. Unlike other contracts, contracts for design and construction must be continuously managed. The main ingredients of any construction contract are scope, time, costs and quality. Most disputes involving scope and the associated time and cost impact not quickly addressed are left open. The hope that they will just go away doesn't happen. This usually benefits the contractor not the developer. Recognizing that change occurs on every construction project, the need for establishing a change management process is essential to project success.

7. Lack of real-time dispute/claim management

In the construction industry, the idea of shifting focus away from the task at hand and embarking on litigating any issue is as well received as April 15 of any given year. Most contracts deal with disputes by forcing litigation or if the parties believe they are progressive by arbitration. Neither of these mechanisms work. A much better way to deal with disputes is by engaging a real time dispute process. One process that we like is called early neutral evaluation. This process involves consultants that are specialist in the area of the dispute. For example, if the dispute involves a differing site condition claim by the contractor, the neutral is a geologist. The geologist is neutral in that he/she does not work for the developer or the contractor, but is recognized as having an expertise and is acceptable to both parties. A short position paper is prepared by each side and the neutral makes a decision within an agreed upon period of time. The decision is typically not binding, but sufficient to bring the parties to an agreement. Once the process is effectively used on one issue, we find that the developer and the contractor work out their issues must more timely and reasonably.

8. Lack of Coordinated Contract Documents

The contract is one of the most critical contract documents in that it requires the participation and coordination of at least eight very separate and distinct participants. Otherwise, the contract will serve the best interest of the one who governs it, resulting in costly and painful disputes if you are not that one.

9. Lack of Rresource management

The modern trend is to reduce overhead which often results in the shedding of resources. This can be detrimental to the success of a project. Not only are sufficient resources required, but, more importantly, the right resources. Utilizing the warm body available can lead to more work rather than less. Alignment of project participants is also critical to the successful delivery of any project. Too often, tasking is managed by experience with no system for lessons learned or differences in the program. Creation of defined work structures occurs once alignment is achieved. Many project owners tend to allow the contracting process to drive this effort. This is not the best approach. Not only does it drive up the cost of contracting, it leaves the "scoping" of the work to those not ordinarily involved in the planning. If left to a lawyer not trained in this process, the results will be an agreement that does not reflect the program. This happens more often than most would suspect. Worse, given the recent legal trend relating to the abandonment of contracts, risks are substantially increased.

10. Reliance on risk transfer not risk magement

Those seeking to increase the likelihood of project success will evaluate what the risks are, what risks they can best control and bear and thus benefit from having these risks assigned to them. Once assigned, systematic attention to assumed risk will make the difference between being rewarded and being punished for taking the risk. Studies presented by several leading industry organizations, have concluded the following: 1) Risk belongs with the party best able to evaluate, control, bear the cost and benefit from its assumption. 2) Sometimes risks should be shared. 3) Every risk has an associated and unavoidable cost that must be assumed somewhere in the process. This is where insurance becomes increasingly critical. Just because a party may not be able to bear the financial consequences of an assumed risk does not mean the risk should not be assigned to that party if it otherwise is in the best position to evaluate and control the transferred risks.

Rodarti is principal of Aliso Viejo-based Project Delivery Services, a multi-discipline real estate consulting firm that provides construction oversight and risk management expertise to owners/developers of residential and commercial projects.